A creditor is defined as someone who has a claim against another natural or legal person and claims his or her right – for example, to repay the amount owed, including interest. A creditor can be not only a bank, a company or the state, but also, for example, a mother demanding payment of maintenance or a person who has lent money to a friend who has not properly repaid it according to the contract.
A secured creditor is a creditor who has secured his claim with an asset or right from the debtor’s property. In the case of mortgages, the secured creditor is a bank that has secured its claim by a lien on a specific property (e.g. apartment, family house, land). If the borrower defaults on the mortgage, the bank satisfies its claim by selling the property.
Banks will thoroughly vet mortgage applicants
Banks always take the risk of not getting the money back when they make mortgages. In order to minimise this risk for the bank, it will properly vet each applicant before granting a loan. They are not only interested in the value of the mortgaged property, but also the amount and source of income, the amount of regular expenses and the payment history of the mortgage applicant.